Construction began in 1790, after Parliamentary approval was given. Construction was funded by the Merthyr ironworks owners seeking a means of transporting their iron to the sea.
The contractor for the project was Thomas Dadford, a pupil of the canal engineer James Brindley.
The Merthyr to Pontypridd section was completed in 1792, the Pontypridd to Cardiff section in 1794. The canal was completed in 1798 with the addition of a sea lock in Cardiff docks. The cost was £103,600.
The canal was around 25 miles (40 km) long, with a drop of around 542 feet (165 m) requiring 50 locks.
The shares in the canal were bought in 1883 by the Marquess of Bute.
The canal lost favour after the Taff Vale Railway opened, and the upper section suffered from the effects of mining subsidence. Today, limited traces of the canal remain – one or two bridges and locks. The only tunnel, in Cardiff, has disappeared entirely.